Budget 2009 Summary

Business and Corporation Tax Changes

The full rate of corporation tax for the Financial year 2010 starting 1 April 2010 will remain 28%
BN02

The small company rate for financial year 2009 starting 1 April 2009 will remain 21%. It is expected that the rate will increase to 22% from 1 April 2010.
BN02

Although announced as a doubling of the rate of writing down allowance, the change to capital allowances is to allow a one year First year allowance on the main capital allowances pool for expenditure on or after 1 April 2009 for companies and 6 April 2009 for other businesses. The FYA will be available to companies, individuals and all partnerships. It will not apply to cars (which are now included in the main pool if they emit no more than 160g/km) or assets used for leasing. It will not be relevant to those spending less that £50,000 a year on capital equipment as AIA will cover the expenditure.
BN04

The loss carry back rules announced in the Pre Budget report have been improved by the extension of the loss making period from one to two years. For companies, losses arising in corporation tax accounting periods ending between 24 November 2008 and 23 November 2010 will be available for a three year carry back. For income tax, losses arising in 2008/09 and 2009/10 will benefit from the extended carry back rules. The restriction on relief of £50,000 of the loss to be carried back by more than one year will apply to each loss making period separately, but the £50,000 is an annual limit so short loss making periods will be restricted. Repayments of tax as a result of this measure can be made with effect from Budget day.
BN13

The Business Payment Support Scheme is being refined to permit Time to Pay applications to reflect current period losses which will be carried back against previous profits. Applications to reduce tax outstanding can be made before the end of the loss making period, even though the loss is not at that time ascertained.
PN01page 7

Capital Allowances on cars have been reformed as promised in the Pre Budget report, with the final draft legislation published. In summary this allows cars emitting no more than 160g/km to be included in the main pool (but not to attract AIA) and cars emitting more than that to be included in the special rate pool. Restrictions on lease payments will apply to higher emitting cars and to shorter term hire periods in excess of 45 days. Motorcycles will no longer be treated as cars, and so will qualify for AIA. There are anti avoidance rules to prevent the rules being circumvented (including through the use of single asset leasing companies within groups).
BN65

The measures proposed during the last 12 months to deal with the taxation of foreign profits earned by companies have been finalised. The proposed changes take into account representations made during the final stage of the consultation and will affect the taxation of foreign dividends -which will be largely exempt from UK corporation tax - and tax deductions for interest – which will effectively be capped for larger companies. There will also be some associated reform of the CFC rules.
BN05

The loan relationship rules affecting connected companies will be revised to relax the late paid interest rules for companies in qualifying territories and to tighten up the rules on release of debt.
BN06

There are a number of improvements to the Venture Capital Schemes which will potentially stimulate more venture capital becoming available. The changes to EIS include an enhancement to the carry back rules.
BN08

An amendment to the group rules for offsetting capital losses will make the current election which deems an asset to have been transferred to another member of the group before disposal outside the group into a simple election to transfer a gain or loss between companies which so elect. This frees up losses for relief where there has been no third party sale.
BN28

There will be further additions to the approved technologies which benefit from the 100% ECA scheme. These will be implemented in the summer of 2009.
BN11

Losses denominated in foreign currency will be required to be re-converted into sterling when they are relieved in a period other than which they arose. The rate used will match the rate applying to the profits against which relief is given. This applies to all accounting periods commencing on or after 29 December 2007 unless an election is made under transitional rules.
BN19

The "three line account" limit for self assessment returns will be increased to align with the VAT registration threshold from 2009/10 (2010 returns) and this relationship will be maintained. The limit will apply to both trading income and rental businesses, and to both individual and partnership returns. Concerns about the increased risk of filing limited information were dismissed by HMRC. The contribution to risk assessment of the more detailed accounts is said to be negligible.
HMRC will introduce measures to collect small debts it is owed through the PAYE (Pay As You Earn) system. These measures are likely to come into effect in April 2012.

Summary of vat changes

VAT registration threshold increased from £67,000 to £68,000 with effect from 1 May 2009, a rise of 1.5%.

BN70

VAT voluntary deregistration threshold increased from £65,000 to £66,000 with effect from 1 May 2009, a rise of 1.5%.
BN70

Simplified procedure for those opting to tax a building which has been used to make exempt supplies with effect from 1 May 2009. This will mean that property owners will be less likely to have to contact HMRC for permission to exercise the option to tax. Related concessions will be withdrawn from 2010.
BN67

Reduced rate of 5% VAT currently applying to children’s car seats and related wheeled framework and booster cushions will be extended so that it also applies to car seat bases. Takes effect on 1 July 2009.
BN68

VAT fuel scale charges which provide an output tax charge to be paid when VAT on fuel used privately is subject to input tax recovery increased with effect from 1 May 2009. These rise by an average of 9.6%
BN69

VAT standard rate increases back to 17.5% on 1 January 2010 – a confirmation of the announcement made in November 2008.
BN71

Anti forestalling legislation has been tabled for Finance Bill 2009 to prevent businesses which suffer a VAT input tax block from manipulating supplies forward to the period when the 15% standard rate applies. The legislation will prevent connected parties from abusing the change in rate, and will also prevent 15% VAT applying to any supplies which are invoiced before the end of 2009, but for which payment is not due for at least 6 months; the measures will, however only apply where the customer cannot recover all of the VATcharged.
BN72

Various changes are made to VAT on gaming activities, including removing VAT from participation fees with effect from 27 April 2009, and increasing bingo duty to 22%.
BN73

2010 brings new cross border services rules throughout the EU. As a result, the Budget includes various announcements in relation to these changes, including changes to the place of supply rules (BN74) which will lead to services generally being taxable where consumed, amended time of supply rules (BN75), and the introduction of a requirement for suppliers of cross border services in the EU to complete EC Sales lists (BN76). Most take effect from 1 January 2010.

Cross border reclaims of EU VAT will be simplified in 2010 when the rules change to permit reclaims to be made to HMRC electronically rather than on paper to the member state concerned (as now). The change will apply to claims made from 1 January 2010, and is likely to mean that smaller businesses will be able to make EU VAT reclaims in future, due to the simplification in the procedure.
BN77

Employment and Benefits in Kind

Employees occupying living accommodation as part of their benefit package will not be able to avoid tax by living in property in respect of which a lease premium has been paid, which would otherwise reduce the rent and thus the benefit chargeable to tax.
BN56

The tax rules for company cars will change from April 2011 as follows. The cap on list price of £80,000 will be abolished, meaning that those with very high value cars will pay more tax on them as a benefit in kind. The lower threshold to which the 15% rate of benefit applies will be reduced from the current level of 135g/km to 125g/km. We had already been told that this would be 130g/km for 2010/11. Discounts for alternative fuel vehicles will all be abolished, and replaced by a single new rate of 9% applying to electrically propelled cars registered from 1998 onwards. All other cars will be taxed by reference only to their emissions.
BN64

Voluntary managed payment plans (MPPs) will be introduced to help taxpayers' cashflow. MPPs will allow taxpayers to spread their income tax or corporation tax payments equally over a period either side of their normal due date without incurring interest or penalties. These measures will be introduced under the 2009 Finance Bill but won't come into effect until April 2011 at the earliest.

From a date yet to be announced, the limit on a week's pay for the purposes of making statutory redundancy payments will rise from £350 to £380.

Summary of other measures

Taxpayers who are penalised for deliberately understating their tax due (or inflating claims) where the potential lost revenue exceeds £25,000 will have their names and addresses and the details of the tax, interest and penalties involved published. Where the taxpayer has made an unprompted or a full prompted disclosure the publicity measure will not apply, but otherwise publication will be made quarterly within one year of the penalty becoming final and will be removed one year later.
BN63

The SDLT “holiday” on residential property costing up to £175,000 which was due to come to an end on 2 September 2009 has been extended until 31 December 2009.
BN45

The threshold at which the “substantial donors” rules affect charities is to increase to a six year total gift limit of £150,000 (from £100,000) with effect from 23 April 2009. The single gift annual limit of £25,000 is unaffected.
BN53

There is to reform of the error or mistake provisions to provide statutory relief where tax has been overpaid. The change will allow the claimant to make a claim when tax has been overpaid, whether or not there has been a mistake, and to determine the amount of the claim. The rules on when and on what grounds a claim can be made will be set out in legislation.
BN87

Powers in relation to tax debt will be extended to allow HMRC to seek information about a missing tax debtor and to require companies and businesses to provide contact details. This will take effect from Royal Assent to the 2009 Finance Bill.
BN88

Penalties for late payment of tax and late filing of returns will be reformed by Finance Bill 2009, and changes will for the first time impose a penalty on employers who pay over PAYE and NIC late during a tax year, with a rising penalty determined by the number of late payments made. Interest on late paid tax will also be harmonised across the taxes.
BN90 & BN91

 

Edmund house, 27 St. James's Road, Dudley, West Midlands, DY1 3JD